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Land Claim Settlement Trust Land Claim Settlement Trust

Land Claim Settlement Trust - PowerPoint Presentation

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Land Claim Settlement Trust - PPT Presentation

An Introduction May 19 2011 Kim Alexander Fullerton Barrister amp Solicitor 256 River Side Drive Oakville ON L6K 3M9 9058491700 How is a Trust Established It is a legal relationship between ID: 223217

amp trust solicitor alexander trust amp alexander solicitor barrister fullerton kim nation annual payment corporate property plan agreement community

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Slide1

Land Claim Settlement TrustAn IntroductionMay 19, 2011

Kim Alexander Fullerton

Barrister & Solicitor

256 River Side Drive

Oakville, ON L6K 3M9

905-849-1700Slide2

How is a Trust Established?It is a legal relationship betweenSettlor (FN pays money into Trust)Trustee(s) (holds the money for the benefit of FN)Beneficiary (FN & its Members)

Members must approve the Trust Agreement as part of the Land Claim Settlement Referendum

Kim Alexander Fullerton Barrister & Solicitor

2Slide3

Trust Set UpFirst Nation must be the Settlor If First Nation not seen as Settlor it can affect the taxation of the Trust

Beneficiary – First Nation, as represented by its Chief and Council and all members of the First Nation on a collective and undivided basis

Kim Alexander Fullerton Barrister & Solicitor

3Slide4

First Nation TrustsThree primary types of First Nation Trusts1) Corporate Trust2) Community Trust with Member Trustees

3) Hybrid, some combination of the first two

Kim Alexander Fullerton Barrister & Solicitor

4Slide5

Structure of First Nation TrustsFactors that can influence type of Trust Agreement:Amount of $Uses of the Trust Property

Decision making

Costs to administer the Trust

Chief and Council believe that the Corporate Trust Model is best for Georgina Island

Kim Alexander Fullerton Barrister & Solicitor

5Slide6

Corporate TrustThe role of the Trust is toReceive the $Invest the $

Make an annual payment to the First Nation

The Capital is generally not spent (except for clearly stated purposes like purchasing land)

Rather it is invested to generate income which is used to make the annual payment to the FN

Kim Alexander Fullerton Barrister & Solicitor

6Slide7

Corporate TrustThe Corporate Trustee generally has no role in determining how funds are spent in the communityThe decision to determine how to spend the annual payment is left to the community – which will need to be addressed separately

Kim Alexander Fullerton Barrister & Solicitor

7Slide8

Band Settlement Account

Trust Account

Initial Uses

Capital

Investment

Annual Payment

First Nation Responsibility

Trustee Responsibility

Corporate Trust

Community decides

what to do with funds

Uses & decision making need to be addressed by the First Nation

Another Trust

S. 83 Expenditure By-law

Financial PolicySlide9

Key Questions for Developing a TrustHow long should the Trust Last?What is the Purpose of the Trust?How can the Trust Property be expended?Which Trust Company to use?How should the investment of the funds be handled?

Personal Cash Distributions to Members (PCD)

Impact of Inflation

Demographics – How many Members will you have in 50 or 100 years?

Kim Alexander Fullerton Barrister & Solicitor

9Slide10

Key Questions for Developing a TrustWhat are the Tax Consequences?What are the accountability and reporting requirements of the Trust?What conflicts may arise and how will they be addressed?

Kim Alexander Fullerton Barrister & Solicitor

10Slide11

Key Questions for Building a TrustNo right or wrong answersNo “one size fits all”Each First Nation is unique – Trust needs to be designed to fit the First Nation’s purpose and the planTake the appropriate time, energy and resources to develop the plan and the Trust Agreement

Kim Alexander Fullerton Barrister & Solicitor

11Slide12

PurposeThe fundamental purposes for the Trust must be determinedSpecific Claim Settlement TrustThe Settlement Agreement with Canada will allow Georgina Island to buy land and add it to reserveOnce the purposes for the Trust are established then a plan needs to be put in place

Kim Alexander Fullerton Barrister & Solicitor

12Slide13

PlanOne of the first questions or decisions that will need to be made is “will the capital be spent and if so how much and on what?”The more utilized upfront means less will be available to invest and generate income in the long termThe more spent upfront on a PCD provides an immediate benefit to the current generation, but less benefits to future generations

Need to determine what is the appropriate balance for the community

Kim Alexander Fullerton Barrister & Solicitor

13Slide14

Uses of Trust PropertyObviously must match with the purpose and planCorporate Trusts are relatively straightforward– Trustee receives, invests and makes annual payment to FN

Kim Alexander Fullerton Barrister & Solicitor

14Slide15

Uses of Trust PropertyThe decisions for a Corporate Trust center aroundThe amount of the annual payment to FN

Who decides how the annual payment is spent

Can the Trust Property be used as security for loans

Amount of PCD

Kim Alexander Fullerton Barrister & Solicitor

15Slide16

Uses of Trust PropertyCorporate TrustAnnual Payment can be structured in different waysAnnual Income

Fluctuates yearly based on rate of return

Long term planning more difficult

Need to address growth of the Trust Property

Smoothing Mechanism Set minimum amountPercentage of Trust Property - 2% to 5%

Makes long term planning easier

Kim Alexander Fullerton Barrister & Solicitor

16Slide17

Uses of Trust PropertyCorporate TrustHow the annual payment is used by the First Nation will be addressedWhat are the Authorized uses

Who and how are decisions made

what are the rules

How are conflicts to be addressed

Can be set out in a separate documentSection 83 Expenditure By-lawFinancial Policy

Kim Alexander Fullerton Barrister & Solicitor

17Slide18

InvestingEnsure get qualified adviceInvestment provisions dictated by the purpose, plan and time horizonHave specific provisions in the Trust Agreement to address investing the Trust Property which, at a minimum:Requires the Trustee and the FN to

obtain qualified advice

Requires the development of an Investment Policy

Clearly provides for who can be retained to do the investing

Kim Alexander Fullerton Barrister & Solicitor

18Slide19

TaxationA FN Trust is neither an Indian nor a First Nation and must pay tax on any retained income in the Trust at the end of every yearGet qualified advice, there are ways to avoid paying tax

While taxation is important, it should not be the overriding factor in determining the plan for the Trust

Kim Alexander Fullerton Barrister & Solicitor

19Slide20

ReportingThe operation of the Trust should be open and transparentRegular reporting requirementsRegular meetings with Council and members

If people know what is going on, they feel more comfortable

Kim Alexander Fullerton Barrister & Solicitor

20Slide21

Annual Operating ExpendituresWhat is it going to cost to implement the Trust?Need controls in the Trust Agreement on such expendituresBudgetary process

Annual Expenditure should not exceed 1% of the value of the trust property

Kim Alexander Fullerton Barrister & Solicitor

21Slide22

ConclusionTake the necessary time and thought in developing the plan and Trust AgreementBe clear on the plan to be followedAllow ample time for community consultation

Use qualified experts

Have an adequate budget for development of the Trust

Kim Alexander Fullerton Barrister & Solicitor

22Slide23

Questions?Kim Alexander Fullerton Barrister & Solicitor23